Entrepreneur, founder of Avecora, Genevine, Supportbreeze, and other startups. Founder of The Genevine Foundation and The Center for Ethical Business. Freshman at Bentley University. read more » / visit markbao.com

China is the manufacturing capital of the world. With over 800 million workers, its workforce is the largest in the world. The obvious answer to manufacturing anything anywhere is China. Because of one reason: it is cheap.

China has a detrimental obsession with cutting costs. Lower costs to their manufacturing means more corporate profits. (Obviously, workers aren’t seeing any of that. Their wages are decreasing.) In fact, the sole reason that China is really any manufacturing power is because of the two reasons:

Cheap labour.

…due to the arbitration of cost of living and currency value.

Currency value drives the low manufacturing expense. Workers work for dollars a day. Their living expense is lowered, because of the low cost of goods in their country. The low cost of goods in China makes less money for the people selling the goods, which is okay because they don’t need much to live up on either. It’s a vicious cycle. If you go to any city in China, your one dollar will get you far more than what it would in the United States.

Even still, cutting costs is something that is still being done. However, the cutting of costs leads to many, many downsides with its quality, workers, Chinese residents, and China as a whole.

Lower quality

Less inspection (high risk to consumers)

Worker conditions and nonexistent worker rights

Lower Quality

The lower costs to production lead to lower quality goods. Products made from cheap materials are rampant in China. Unfortunately, the words “Made In China” is sometimes associated with low-quality goods. And in some cases, it is fitting.

Although the quality of goods is decent in exports, the quality of goods for consumption in the nation itself is a completely different story. The production of products for use internally by China is governed by an extremely aggressive cost-cutting strategy. There have been, however, incidents with exported Chinese goods that are indeed low quality, and unless the clients of the manufacturers change, nothing in that area will ever change.

Less Inspection (high risk to customers)

Throughout the years, there have been cases of anything extremely awful happening with exports to the United States or other purchasing companies, including a few large incidents that are usually few and far in between. However, as previously stated, the story is different when dealing with Chinese goods.

I rarely go to China these days. I love the country, but the quality of goods there is something to take note of. Although the risk is low, I’m extremely wary of the low quality of goods produced in China. I try to avoid buying manufacturered goods and foods and instead opt for direct-from-farm food.

There are two foodstuffs that I try to avoid from manufacturers at all costs: meat and milk. Those to have been through many internal incidents (since they are rarely exported, to the best of my knowledge.) Milk is very different in China than in other places.

The inspection problem is rampant in China. Many times, I do not even opt for the direct-from-farm milk produced by farmers and delivered directly to the door. At China’s massive size, reach, and traditional village and individual autonomy, it is virtually impossible to impose laws and inspections upon the farmers that produce the foods. One does not, for example, know even if pasteurization had been performed on the milk. With farmers barely getting by every year, it is not difficult to imagine the cost-cutting that farmers may take part in.

Manufactured is not better, nor does it give much more confidence to the informed consumer. Although one may say that manufactured milk is more regulated and less autonomous in terms of government intervention, that argument has some merit, but not much. The government seems not to care much about its own people and inspections, though I imagine exist, are not powerful enough. Nor does the government want them to be powerful enough: the more interventions, the higher the cost for the manufacturers, the higher cost for the consumers, and thus, less money exchanges hands, cutting off the blood supply of the national market. Like the small individual farmers, the manufactuers have a will to cut costs.

The problem with laissez-faire economics and market ideals is this very idea. China, despite its socially Communist connections, is a very much based on laissez-faire economics and markets. This is not because the government pushed for this. It is because in a normal capitalist society like that of the United States, United Kingdom, or any other established power, interventions exist in the trajectory of capitalism. With a free market, none of these interventions exist, effectively giving the corporation more power than the government. A normal established capitalistic society has these interventions to protect both their power in their respective nations as well as the well-being of their customers. These are inspections and regulations such as with the FDA.

The difference here is that American manufacturers deal with these inspections and imposed regulations. Thus, the quality of goods is directed by the government, who does have the power to change the regulations and tell manufacturers to comply or get out. Interestingly, China has some power in this as well, despite its extensive size. There is little will to do so, though.

Labour

Labour is a huge problem in the nation. Few laws really govern the rights of workers in China. Even still, such laws are rarely followed, given the large extent of the nation. The working conditions in China are notoriously miserable. Cramped areas, hard, fast-paced, dangerous work, in any sector of work, be it manufacturing, mining, buliding, anything.

It is difficult to gauge the quality of working condintions in China. The problem is with the indifferent mindset of consumers: we know that someone produces the goods that we purchase. But do we care about their conditions? Are they just not simply replacable, behind-the-scenes workers?

This disappointing mindset is the block for change towards responsible and ethical working conditions.

Though there seems to be some reports of manufacturing factories being not as bad as they seem, one has to understand that, especially in this economy, the amount of manufacturing work that is outsourced to China is increased every day. They are pushed to produce and produce more. It is most likely true that the amount of new clients and new manufacturing contracts to China outpaces the improvement of working conditions in China.

Interestingly, labour is one thing that can be changed, at least for manufacturers that serve 1st world clients. That’s my next article.